Learning Points From Brexit

Yes, Britain has spoken. And they want to leave the European Union. I was tuned in to CNN and Bloomberg all the way this morning and here’s some learning points I made as a reminder to myself.

1. Overconfidence

I was so confident of Bremain that if Betfair was available in Singapore, I was likely to have dumped $5k or even $10k at odds of 1.3 a few days/weeks ago. So much for being part of the “smart” money.

And today, after Brexit lost the early morning gains at around 10am, I attempted an intraday trade, buying 1,000 shares of OCBC@8.52, anticipating a few hundred bucks of gain by the afternoon.

And boy was I wrong. By the time the votes were 2/3 in, I had cut my loss @8.30, realising a loss of two hundred bucks.

Once bitten, twice shy? We shall see in the future.

2. Risk/Volatility Tolerance

In anticipation of Bremain and a market surge, I bought a bit more stocks recently, looking to sell them off in the next week.

But I guess with the result turning against me, and expecting more turmoil in the next week, I sold off a couple of positions today.

It does appear a little reactive, but I guess I had to recalibrate my portfolio according to my limited risk/volatility tolerance.

I would rather take a loss of a few hundreds to have a better balance in my asset allocation to sleep better at night, even if I might be accused of “selling low” by others.

Enough about me, on to broader points.

3. Irrationality

Even at this point, after half a day after the results are in, I am still surprised that 52% of UK voters acted against their short-term self interests. Well, they are waking up to the fact that their purchasing power has reduced by 8% overnight.

Like what Bilahari Kausikan mentioned in this article, I don’t know if the UK residents who voted “Leave” anticipated this, but I personally think this is likely to be a rather disastrous outcome for the average UK citizen.

It’s also effectively a vote to reflect a big NO against two main issues: migrants and inequality. Every country is grappling with this.

Next week is going to be interesting.

4. Longer-Term Consequences

Let me begin by stating that I am no expert on EU or the consequences of Brexit. But I feel the thing to look out for is how EU navigates this situation. There’s basically two rather different approaches.

It’s interesting to note that instead of just leaving outright, Nigel Farage stated that a renegotiation with EU on access to the common market is needed. If the EU bend backwards and let Britain have their cake and eat it, i.e. have all the access to common market (benefits) without even giving up a bit of sovereignty and sharing on the costs, the domino effect will begin. That’s moral hazard.

The other alternative is for EU to close ranks and ask Britain to fxxx off. This basically requires France and Germany and the rest of continental Europe to come together strongly, and sort of “isolate” the UK. Set a precedent for the rest of the 27 nation bloc as a warning to what happens when you leave. Do the benefits of leaving/staying really outweigh the costs?

No prizes for guessing which way I feel Merkel and Hollande should go about in negotiations.

As for UK, this probably marks the end of the 100 year decline of the British empire. Yes, the sun is setting. And I would be surprised if Scotland doesn’t call another referendum in the near future.

But well, I could easily get things wrong again, just like this EU referendum. So please don’t take my word for it.

Wow, this post took less than half an hour and maybe I should occasionally just let it all out and type/vomit. It’s pretty therapeutic, honestly. #perksofblogging

4 thoughts on “Learning Points From Brexit”

We are wrong in guessing the outcome, but not really that wrong either, seeing how the % split is not that big.

Simply put, we made that call while seated thousands of km away, making assumptions on what we think the baby boomers and elderly want – holidays, retirement investments stability, maybe even affordable Polish nurses?

But the ground sentiment, especially in smaller cities outside London, may take a little more sniffing out to define. In my limited time there I have seem roaming packs of loutish youths and young parents with dozens of kids in tow, strolling through town, hanging around during the working hours of the weekday.

No prizes for guessing what races or country of origin they are from, if only we take off our Politically-Correct glasses we can truly see.

I was also pretty sure that the Bremain camp would win and very tempted to jump into the stock market before the voting. Then I remember such action would be considered emotional, irrational and impulsive. I was glad that I decided to hold back, stay calm and wait for the voting outcome. A big surprise, indeed. Another surprise to me is that STI didn’t plunge much when the big news came out. Maybe like the investors are also adopting a wait-and-see attitude like me? 🙂